Berlin forecasts Germany's 2011 economic growth at 2.3%

TORONTO (ICIS)--?xml:namespace>Germany’s government expects the country’s economy to grow by 2.3% in 2011, driven by both export and domestic demand, it said on Wednesday.

The increase this year would come after 3.6% growth in 2010 and a 4.7% decline in 2009 from 2008.

In an official outlook report, entitled “Jahreswirtschaftsbericht 2011”, the government said strong export demand in 2010 had sparked higher domestic demand as well.

Unemployment was falling, with overall employment reaching 40.5m people – the highest level since the country’s reunification, it said.

In fact, Germany was seeing increasing shortfalls in qualified labour but the government said it would take steps to address this through training measures and immigration.

Also, Berlin aimed to cut taxes for low-income earners to further boost growth, it said.

At the same time, the government would consolidate public budgets and continue to phase out measures that supported the economy during the crisis, it added.

However, Germany’s growth would depend on stable and reliable conditions in the eurozone, the government said.

Eurozone countries needed to take additional steps to improve “monitoring of economic policies,” the EU's growth and stability pact needed to be strengthened, and the eurozone needed to prepare for future liquidity and solvency crises, the government said.

Martin Wansleben, general manager of the German chamber of commerce (DIHK), said stability in the eurozone was key for Germany’s prospects.

All eurozone member states needed to control government spending and take steps to improve their competitiveness, he said.

Wansleben also said that Germany needed to develop a “welcoming culture” to help attract immigration of qualified workers.

Anton Borner, head of German exporters trade group BGA, warned Germany against rising inflation, which would be driven by higher raw material costs.

Higher interest rates could help dampen inflation, Borner said. However, the European Central Bank was not likely to raise rates given the fragile state of the economy in some eurozone countries, he added.

In Germany’s chemical industry, production is expected to grow by 2.5% in 2011. This would compare with 11% growth in 2010, and a 10% decline in production in 2009 from 2008.

However, last week a chemical employers’ trade group said that Germany’s chemical production was still 2% below pre-crisis levels and chemical firms’ investment plans continued to be marked by uncertainty over the future economic situation.